China’s strategic interests in Pakistan’s port at Gwadar

On 30 January 2013, the Port Singapore Authority (PSA) abandoned administrative control of Gwadar port in Pakistan — five years into a 40-year agreement.

Pakistan has now handed over the ‘management and operation’ of Gwadar port to a Chinese company, and in another landmark decision, Pakistan has signed onto the Iran–Pakistan gas pipeline, much to the annoyance of the United States.

Commentators argue that both agreements are a political stunt; the incumbent government made these decisions shortly before it completed its five-year term in an attempt to restore its declining popularity. It has now left the next government to deal with the consequences.

Gwadar is located at the juncture of South Asia, Central Asia and the Middle East. It is close to the Iranian border and lies at the gateway to the Strait of Hormuz, a key world oil supply route. Some analysts argue the port could become China’s naval base in the Indian Ocean and enable Beijing to monitor Indian and US naval activities. The port has also been called the western-most link in China’s ‘string of pearls’ strategy.

How valid are these claims and what is the port’s real importance to China?

Pakistan purchased the small town of Gwadar from Oman in 1958, but did not begin work on a port there until 2002. Pakistan lacks ports for shipping and maritime security — in successive conflicts, the Indian Navy quickly blockaded Karachi, severely limiting the Pakistan Navy’s manoeuvrability. Gwadar, a deep warm-water harbour 470 kilometres away from Karachi, seemed an ideal place for a new outlet to the Indian Ocean. At Pakistan’s request, China provided US$198 million for the first phase of the port, which was completed in 2006, but was lukewarm about further development. The project consists of three phases, so Pakistan is still waiting for investment to complete the remaining two.

The robust nature of China–Pakistan defence ties, and a number of interrelated developments therein, has catapulted the port to international attention. China is developing its own western region and has been building a network of roads in Pakistan, and intends to lay pipelines and a railway track. Pakistan offered China a ‘trade and energy corridor’ via Gwadar, linked to inland roads. The plan would see oil being imported from the Middle East, stored in refineries at Gwadar and sent to China via roads, pipelines or railway. Many Western and Indian analysts argue that China wants to gain a foothold in Gwadar for strategic purposes.

This analysis overplays Gwadar’s geo-economic importance and ignores important facts. Firstly, though China has built some roads in Pakistan, it still needs to lay thousands of kilometres of gas and oil pipelines and railway track in order to turn Gwadar to economic use. That will cost money, and China is reluctant to invest in this volatile part of the world. Secondly, Pakistan faces a low-scale insurgency in its Balochistan province — where Gwadar is located and through which the proposed pipelines will pass. A number of feudal lords are opposed to large-scale foreign investment, fearing it will bring an influx of outsiders. They demand greater autonomy and royalties for the extraction of natural resources. Although China has developed local infrastructure, it is considered an ‘exploiter’. Some Chinese workers have in the past been victims of targeted attacks. Thirdly, the port has failed to draw any major business since its completion in 2006. The fact that the port remained unused was one reason the PSA withdrew. Unlike Islamabad’s tall claims about the port’s geo-economic significance, Beijing has taken a more cautious and realistic approach. China remains sceptical of the port’s profitability. Both in 2001, when it agreed to finance the first phase of the port, and in 2013, when it took over administrative control of the port, Pakistan had to drag Beijing into the project.

Gwadar is not the only option for the Chinese in the Indian Ocean. It is not even the most viable option. Beijing has developed Hambantota port in Sri Lanka and built a container port facility in Chittagong in Bangladesh. In Myanmar, Beijing has built roads, dams and pipelines, and is looking to the ports of Kyaukpyu and Sittwe, regardless of the fact that the latter is being built by India. Beijing intends to lay a pipeline from Kyaukpyu to Yunnan province. Chinese oil ships from the Middle East and Africa will cross the Bay of Bengal and unload at these ports, allowing oil to be piped to Yunnan. China appears more optimistic about the future of an Arakana–Yunnan pipeline than the Gwadar–Xinjiang pipeline because it considers Myanmar capable of protecting its assets.

Due to its strategic location, and because the strong military ties between China and Pakistan, Gwadar port has received excessive attention from the very beginning. Despite its being over a decade since China started construction of the first phase, no military-related activity has ever been observed there. If China intended to use a Pakistani port for naval purposes, Karachi, with its established military infrastructure, is an alternative that is available although Karachi has the strategic diswadvantage of proximity to India.

It is likely that China will develop the port quickly by making a bigger investment than the PSA, but its current interests appear commercial, aimed at securing its energy supplies. Moreover, Gwadar is just one of several options for Beijing, and due to the volatile security situation in the surrounding region it may not be China’s best bet. Gwadar is far from becoming a Chinese economic hub, let alone a security asset.

Ghulam Ali is PhD from Monash University in Melbourne and is presently assistant professor at COMSATS Institute of Information Technology in Islamabad.

As someone that is not intimately knowledgeable of this area, I had a related question after reading this article: given the undeniably geo-strategic location of Gwadar near the Strait of Hormuz, why-in your opinion has the port been unprofitable since 2006? Do you think it is simply a reflection of the volatility in the region or is there more to it?

The actual reason why Gawadar didn’t take off, as wished for by people of Pakistan, is that the PRC felt it necessary to wait and see whether the day would come when the real people of Pakistan (not just the elite which has ‘deeper’ connections with the west) would finally demonstrate their ‘non preference for USA, clearly. That finally happened, courtesy US action in Afghanistan; and the North of Pakistan and its continued posture to ‘rule’ Pakistan through oligarchies headed by feudal rulers; and the military junta. In my opinion, the PRC is fully conscious of these conditions; and would now go all the way to build/develop Gawadar as a trade, industry and military base in the area. The local ‘inspired’ resistence earlier seen in the area can be controlled.

Russia invaded Afghanistan in 1979 to reach the warm waters of the Gulf and its oil. Pakistan did not let it succeed. Now in 2013 after 34 years, Pakistan has allowed China a foothold in the vicinity of the Gulf. Gawaddar and Khunjrab (Sinkiang China) may one day become another Suez Canal for China.Economy is not the major factor,it is the presence of a great world power at the mouth of the Gulf.